The government's Bureau of Labor Statistics reported today that consumer prices fell 0.2 percent in February.
Lower prices should be good news, right? Wrong, at least according to Martin Crutsinger at the Associated Press. Crutsinger's Wednesday dispatch also managed to ignore the fact that even the supposedly low inflation seen during the past 12 months has eaten up most of workers' very nominal pay increases, even though the BLS's Real Earnings news release came out at the same time as the Consumer Price Index. This is yet more evidence that the so-called "recovery" we were promised years ago still hasn't fully happened, and that the current situation is on the verge of getting worse, and not better.
One has to conclude from AP's headline and Crutsinger's first paragraph that higher inflation would be a desirable thing:
US CONSUMER PRICES SLIP IN FEBRUARY
U.S. consumer prices fell in February, dragged by another steep drop in energy prices. However, core inflation managed to tick higher, led by the biggest jump in clothing costs in seven years.
Consumer prices edged down 0.2 percent last month after no change in January and a small decline in December, the Labor Department reported Wednesday.
Core inflation, which excludes the volatile categories of food and energy, rose 0.3 percent following a similar 0.3 percent rise in January.
Over the past 12 months, overall inflation is up a modest 1 percent. But core inflation is up 2.3 percent, the biggest 12-month gain since May 2012.
You don't describe prices as having "slipped" if you believe that lower prices are good.
The fixation on the supposed need for 2 percent to 3 percent inflation is the Federal Reserve's apparent desire to use its presence as a justification for raising interest rates. Fed policies have so distorted and spoiled the credit markets that it needs a reason other than returning rates to market levels — which is far and away the best reason — to justify its moves. The Fed passed on an interest rate increase today. This was a wholly predictable move, given its reluctance to keep the stock market from falling too far from its current artificially high levels.
In rooting for inflation to return, the press and the Fed are essentially rooting for the financial system to rob everyday workers of their purchasing power. That's the case because workers' raises in real terms, even now, almost seven years after the recession's official end, are not only barely advancing. They're getting weaker:
Average weekly earnings (bottom row) are only up 1.6 percent during the past 12 months. After inflation (red-boxed line), they're only up by a miserable 0.6 percent. Given the widening income inequality the administration of President Obama claims to dislike but has proactively made worse with its economic policies, that small increase means that a significant portion of those in the bottom half of the earning scale are surely no increase in the purchasing power of their disposable incomes or are actually losing ground.
Also note the deterioration from left to right in the red boxed row. Workers had a decent 12 months ended February 2015, but it's been dowhill from there, especially during the past two months, as real income gains have almost disappeared.
But that's not news at the AP, which seems to think that even more inflation while earnings continue to stagnate would be a good thing.
This kind of journalistic malpractice would never occur during a Republican or conservative administration. Instead, the press would be blaming everything — even the Fed's unjustifiable stances — on the President.
Cross-posted at BizzyBlog.com.